The Secretary of State to Senator Kenneth S. Wherry 1

My Dear Senator Wherry: I have received your letter of June 3, 19482 requesting a statement of the position of the Department of [Page 605] State with respect to Mexican petroleum development. The Department’s position on the specific points presented in your letter may be summarized as follows:

The Department of State is keenly aware of the desirability of encouraging the development of petroleum resources not only in Mexico but also in the Western Hemisphere generally, in the interest of improving the economic development and defense potentialities of the entire area. The Department is favorably disposed toward the objective of the plan recently announced by the Mexican Government agency, Petroleos Mexicanos (PEMEX), for development of Mexican petroleum resources as rapidly as possible. The Department believes that achievement of this objective will depend upon the establishment and maintenance of conditions under which United States petroleum companies participate in the oil industry of Mexico on a basis mutually satisfactory to the companies and to the Mexican Government.
The Department of State is familiar with the type of drilling contracts (which PEMEX is offering to American companies wishing to participate in the exploration and development of petroleum resources in Mexico.
As indicated above, the Department favors the participation of American companies in the Mexican petroleum industry. The basis for such participation, however, is a matter to be worked out to the mutual satisfaction of the companies and the Mexican Government. The Department is interested in promoting the development of such arrangements but understands that the United States petroleum industry generally feels that the PEMEX contracts do not provide sufficient incentive to United States companies in view of the uncertainty of oil exploration and development operations.
Oil well supplies, particularly tubular goods, are in short supply and their export is subject to control by the Office of International Trade in the Department of Commerce. In view of the world shortage of both oil industry equipment and petroleum, the Department feels that in general the supplies of oil industry equipment available for export should be channeled to those destinations offering the greatest potential addition to world petroleum supplies per unit of new equipment. Other considerations must be taken into account, of course, including the availability of such new oil supplies to the more important consuming markets and particularly to the United States in the event of an emergency. Mexico’s proximity to the United States would be an added factor favoring the shipment of available oil industry equipment to that country for promising petroleum developments.
It is believed that the petroleum delivered by PEMEX to American companies under drilling contracts would be crude oil, but regardless of the nature of the products the Department would not object [Page 606] to the issuance of letters of intent by the Armed Forces or by other Government agencies for the purchase of such products if this would serve to stimulate the development program in Mexico.

If the Department can be of further assistance to your Committee in this matter, do not hesitate to let me know.

Sincerely yours,

For the Secretary of State:
Charles E. Bohlen

  1. Chairman, Special Committee to Study Problems of American Small Business, United States Senate.
  2. Not printed.